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California CUs saw slight growth in 4Q says DFI

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SACRAMENTO, Calif. (3/26/09)--California's credit unions continued to experience growth in total assets, total loans and total shares, according to statistics released for fourth quarter 2008 by the state's Department of Financial Institutions (DFI). Credit unions' assets, which totaled $72.6 billion, grew 1.7% from the $71.4 billion reported as of Dec. 31, 2007. Loans rose a fraction of a percent during the year to $52 billion, while shares grew 1.4% to $60.5 billion from $59.7 billion the year before. However, for the full year 2008, loans rose 2.5%. "Given the economy, the growth rate is excellent," Daniel Penrod, industry analyst with the California and Nevada Credit Union Leagues, told News Now. "Banks have pulled back and contracted their lending or are not lending at all, and credit unions are filling the market," he said. Also, credit unions' conservative lending has served them well. "Credit unions have never had to change their lending standards. Loan standards are conservative, the same as they were years ago. That's why credit unions are still lending," Penrod added. California credit unions' share growth for the full year was 4.25%, which is very good, Penrod added. "The key to these numbers is that they're sustainable. The growth doesn't throw the organization out of whack," he said. "In the lending boom, you had growth in double digits--that's not sustainable over a long time. You need 3% to 5% growth to sustain the credit union over the long term." Members equity decreased 2.4% during the year to $7.4 billion from $7.6 billion, causing the capital-to-asset ratio to decrease to 10.23% at year-end 2008 from 10.66% at year-end 2007. Credit unions are still well-capitalized, said Penrod, noting that 7% is considered well-capitalized. DFI noted the allowance for loan losses was up 82.2%--from $450.7 million to $821.3 million. But credit unions' charge-off ratio in California is at 1.17 for 2008, still very low, Penrod said. "Credit unions are finding ways to modify loans and avoid charge-offs. Credit unions increase their loan loss reserves and put money aside to prepare for it. They are well-capitalized enough to absorb loss and continue business as usual and even grow." Net margin to average assets rose to 4.22% from 4.02% a year earlier, and the provision for loan losses more than doubled--to $1.1 billion from $483 million at the end of 2007. Net income dropped from $218.1 million in 2007 to a net loss of $197 million, a decrease of $415 million or 190.3%. Delinquent loans were up 86.6%, or $411.7 million, to $887.2 million from $411.7 million. That doesn’t tell the full story, however. "Delinquent loans increased, but the actual delinquency ratio for 2008 is 1.65. Banks would kill for that kind of ratio," Penrod told News Now. Banks' delinquency ratio is significantly higher, at 3%. Nine fewer credit unions existed in the state at the end of 2008, with the number dropping to 187 from 196, said DFI. California's state-chartered commercial banks also saw losses during fourth quarter. Their net interest margin dropped to 3.23% from 3.50%, constricted by the increased cost of funds. Loan loss reserves for the banks were up 60.2% to $3.1 billion at year-end 2008 from $1.9 billion a year earlier. However, noncurrent loans went up from $1.5 billion to $4.6 billion, which caused reserve coverage of noncurrent loans to decrease to 66.61% from 130.02%.

Ex-Enron FCU CEO on crisis Communicate

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LaPORTE, Texas (3/26/09)--The former CEO of Enron FCU (now Startrust FCU) has advice for credit unions trying to differentiate themselves in the public eye from bankers and other entities with "credit union" in their name: Communicate. When Enron FCU's sponsor, the Enron Corp., filed for bankruptcy, the credit union suddenly found its name a liability. People lined up around the credit union to withdraw their funds. Members didn't understand that the credit union was separate from the failing company. Jack McAdoo, who is now CEO of Beacon FCU in LaPorte Texas, made a decision to communicate, he told Natasha Melugin, director of REAL Solutions at the Texas Credit Union League, for the league's blog, CU Grow (March 25). It turned out to be his best decision. "Communicate. Communicate. Communicate. And do it in person as much as possible. People like to hear 'it' straight from the horse's mouth," McAdoo said. He spoke to people in person and over the phone, sent letters and used the Web to "constantly and repeatedly" tell the story of how the credit union was different, independent, and safe and sound. Within seven months, McAdoo oversaw a name change, relocation and a field of membership expansion. Among his tips:
* Be ready to communicate with talking points and handouts. Know your plan and what you will say today, but wait, " he said. "Don't create a crisis by scaring everybody before something happens." * Keep staff informed so they can handle situations with members confidently. * Manage the grapevine. Make everyone understand nothing may be communicated publicly unless it has been previously approved. The person responsible for approving communications must be constantly available to handle situations that come up. Designate individuals to handle media inquiries.
For the full interview, use the link.

ICNNMoney.comI reassures CU members about CUs

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NEW YORK (3/26/09) Monday reassured credit union members that their credit unions are safe. The article, “Credit Union Members: Don’t Panic,” reminds members that credit unions offer some of the “best deals” in banking. The piece was written in response to news about two corporate credit unions being placed into conservatorship. CNNMoney also noted that member deposits at federally insured credit unions are backed by the National Credit Union Administration. “You’re still going to find low fees and good deals at credit unions,” the article said. “As long as your institution is federally insured and your deposits fall below the insured limits, you can rest easy.” The article also prompted a debate in a comments forum about credit unions’ tax-exempt status. Several readers noted that credit unions, unlike banks, have not asked for taxpayer money to bail them out.

Eight corporates ratings reaffirmed with some changes

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CHICAGO (3/26/09)--The issuer default ratings (IDRs) of eight corporate credit unions were reaffirmed with a stable outlook by Fitch Ratings, which also lowered individual ratings of each corporate. Fitch said it based the affirmations on the National Credit Union Administration's (NCUA) "continued demonstrated support for these entities." In February, Fitch raised the support ratings of the corporates to "1" and established a support rating floor of "A+" to emphasize the importance of government support in assessing the probability of default for the entities. Fitch added that the adjusted rating action on each corporate's individual ratings follows NCUA's announcement that it was placing U.S. Central FCU into conservatorship. "The conservatorship will impair the value of the capital share investment in USC of each corporate credit union rated by Fitch, resulting in a significant negative impact on each institution's capital," Fitch said. The corporates are:
* Central Corporate CU (CenCorp), Southfield, Mich.; * Constitution Corporate FCU, Wallingford, Conn.; * Eastern Corporate (EasCorp) FCU, Auburn, Mass.; * First Corporate (FirstCorp) CU, Phoenix ; * Mid-Atlantic Corporate FCU, Middletown, Pa.; * Members United Corporate FCU, Eagan, Minn.; * Southeast Corporate FCU, Tallahassee, Fla.; and * Southwest Corporate FCU, Plano, Texas.
To view the ratings, use the link.

Manitoba CUs grew in 08 expect a tighter 09

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MANITOBA, Canada (3/26/09)--Manitoba’s 48 credit unions experienced significant growth in 2008 despite the global economic crisis, but 2009 could be tighter. For the 12 months ended Dec. 31, credit unions in the province increased their assets by 11.9% to $14.4 billion; their loan portfolio by 14.7% to $12.1 billion; and their deposits by 11.5% to $13.4 billion--which marks the ninth consecutive year of double-digit growth (Winnipeg Free Press March 25). Because the province’s 182 credit union branches continued to attract deposits in 2008, they were able to lend money to members and businesses, Garth Manness, CEO, Credit Union Central of Manitoba, told the newspaper. “The [global] liquidity crisis meant most financial institutions were short of [lending capital] and had trouble financing lending,” Manness said. “Our credit unions had the liquidity to be able to meet lending demand.” However, the continuing economic downturn will likely temper credit union growth in 2009, Mannes told the paper. “It’s going to be a tighter year, but credit unions still have liquidity,” he said. “They’re still lending it out and they’re still attracting deposits.”

Governor nominates three to Texas CU Commission

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AUSTIN, Texas (3/26/09)--Texas Gov. Rick Perry appointed three people to positions on the Texas Credit Union Commission (TCUC). Perry reappointed current TCUC Chairman Gary Janacek, CEO of Scott & White CU, Temple, Texas, to a second six-year term (The Advocate March 24). Perry also appointed two new public members--David Cibrian and John Yoggerst--to serve six-year terms. Cibrian, who replaces public member Mary Ann Grant, is an attorney in San Antonio. Yoggerst, who replaces Rusty Ballard, is a general partner in a construction management company in San Antonio.

NCUF Innovation Grant attracts Spanish members

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FAIRFAX, Va. (3/26/09)--Fairfax County FCU is leveraging a $99,900 Innovation Grant from the National Credit Union Foundation (NCUF) to attract members from the Hispanic community through partnerships with Spanish media. This is the second-largest of 14 NCUF Innovation Grants helping credit unions invest in their communities in 2009. Innovation Grants are made possible by supporters of NCUF and investors in the Community Investment Fund. CBS Spanish affiliate El Zol Radio, Cox Cable en Espanol, and Entravision--including Telefutura, Univision, and WJAL--are contributing a combined $430,000 worth of in-kind media for the $223.1 million asset, Fairfax. Va.-based credit union to use throughout 2009. The in-kind media include radio and TV commercials, public service announcements, long-form interviews, news segments, banner placements and literature distribution at Hispanic community events. “The launch of our media campaign has already resulted in 17% of our new members coming from Hispanic origins and 60% opening checking accounts,” said Fairfax Chief Marketing Officer Matthew Kaudy. “I am forecasting the trend to continue upward as the frequency of our message continues to increase and we continue to expand our messages through additional channels.” More than 100,000 of Virginia’s 400,000 Hispanics reside in Fairfax County. “Other financial institutions entering the Hispanic market primarily implement only a limited, short-term strategy: simply translating their current products into Spanish,” said Fairfax CEO Joe Thomas. “We must go much further. We have a valuable long-term opportunity to serve the Hispanic community, based on the credit union philosophy of ‘People Helping People,’ as opposed to a solely profit-based opportunity.” “Education about the benefits of the credit union system is imperative to the success of all programs reaching out to the Hispanic market,” Kaudy said. “Our campaign is designed to educate Hispanics about the credit union by connecting them emotionally. For example, one television ad on Univision features our Hispanic-branded checking account ‘Cuenta Corriente American’ while incorporating overseas footage from Salvadoran and Bolivian cooperatives drawing a connection to American credit unions.” In addition to radio and TV, Fairfax County FCU is bringing educational outreach into the community via partnerships with Hispanic organizations and bilingual member personnel at all touch points. For example, the credit union is partnering with local Hispanic groups to present financial education events themed around Central and South American countries and featuring Hispanic media personalities. Specific products and services designed to meet Hispanics’ needs include:
* A Spanish website featuring online account opening and bill payment; * Hispanic-branded checking accounts with debit rewards cards; * “Safe Accounts” for immigrants without Social Security cards; * Remittance programs that allow immigrants to send money abroad for less than standard wire transfers; and, * Opportunities to earn free international remittances and money orders.
“These products and services are designed to provide Hispanics the opportunity to accumulate assets and ultimately generate wealth for their families,” Kaudy concluded.

Pennsylvania bill would treat FI robberies as felonies

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HARRISBURG, Pa. (3/26/09)--A bill that would ensure robberies at financial institutions--including credit unions--would be treated as a felonies gained unanimous support of the Pennsylvania State Senate Judiciary Committee Tuesday. The Pennsylvania Credit Union Association said it is supporting and monitoring the legislation, and will keep credit unions updated on the status of the bill. Senate Bill 605, introduced by State Sen. Mike Waugh (R-York), calls for robbery of a financial institution to be classified as a second-degree felony, regardless of the method used to commit the robbery (Life is a Highway March 25). SB 605 amends the Pennsylvania Consolidated Statutes, which contains sections pertaining to “robbery” and “robbery of a motor vehicle.” Currently, bank robberies are simply grouped with other “robberies,” and if no bodily harm is done but property is taken, they are classified as third-degree felonies. The legislation, however, addresses the specific action of taking or removing money from a financial institution. The bill also gives prosecutors the tools to prosecute offenders, regardless of the method used by robbers, whether with a note or a gun. Even if no weapon were used to commit the robbery and no bodily harm done, a person could still be found guilty of a second-degree felony.

California Nevada leagues go green at new site

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ONTARIO, Calif. (3/26/09)--The California and Nevada Credit Union Leagues move into the new Ontario Airport Towers this week, marking the sixth change of venue for the trade association. This time the league decided to go green--not the color--but design. Interior materials, including paints, carpeting, and furniture, were selected because of their low chemical emissions and recycled content. Daylight from the office’s numerous windows, combined with efficient lighting fixtures, will help reduce energy use, said the league. Energy Star equipment and appliances were used where possible. And low-flow plumbing fixtures were installed to help reduce water use.
The Ontario Airport Towers Office Complex is the site of the California and Nevada Credit Union Leagues’ new office headquarters--which features sustainable “green’’ elements. The league will move in this week. (Photo provided by the California and Nevada Credit Union Leagues)
Also, the league recycled furniture by reupholstering and reusing much of its existing furniture, reducing the amount of material sent to the landfill. “The league already practices several green activities--from recycling to carpooling--and we wanted to continue in the same spirit of conservation with this move,” said Bill Cheney, league president/CEO. When the league decided in 2007 to relocate from Rancho Cucamonga, league executives searched for a new headquarters. They selected the new Ontario Airport Towers project, partially because of its LEED-approved green design and because the overall occupancy cost would be less than the lease for the old headquarters. The new location features the latest in technological advancements, and the office space is better-suited for the needs of employees and league members, the league said. The league will occupy the entire sixth floor of the project’s first phase, a 150,000-square-foot steel-frame building. The Ontario Airport Towers office complex is scheduled to be completed in three phases and will contain roughly 850,000 square feet of office space. It is currently the largest Class “A” office building in development in the area.

CU System briefs (03/25/2009)

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* NEW YORK (3/26/09)--Washington Square News, a campus paper at New York University, is urging New York University FCU to offer student loans. NYU FCU is considering expanding its services to offer student loans as early as the Fall 2009 semester, said the editorial Tuesday. "We feel this would be a wise and necessary decision in order to ensure that students are able to afford education during the recession," said the newspaper. "We hope that NYU FCU will choose to provide student loan services," said the editorial, noting students would benefit from lower interest rates, no collateral requirement and the security offered by a small, local system. The editorial also discussed credit unions' structure and philosophy and gave information about the $11.2 million asset credit union. For the complete editorial, click on the link … * CHARLOTTE, N.C. (3/26/09)--Forty representatives from North and South Carolina credit unions raised about $57,000 during a charity golf event for the Victory Junction Gang Camp, a NASCAR-themed facility for chronically and terminally ill children. The Fifth Annual Carolinas Cup, held March 15-17, in Southern Pines, N.C., was hosted by the Carolinas Credit Union Foundation, the North and South Carolina Credit Union Leagues, and CUNA Mutual Group. The annual event has generated more than $222,000 for the camp, founded by NASCAR driver Kyle Petty and his wife, Pattie, in memory of their son, Adam, who was killed in a NASCAR racing accident in 2000. From left are John Slack, president/CEO, Carolinas Credit Union Foundation; Kyle Petty; and Robin Kolvek, sales manager, CUNA Mutual Group South Region. (Photo provided by CUNA Mutual Group) … * OMAHA, Neb. (3/26/09)--Caroline Domanski, 62, a former executive of First Nebraska Educators and Employees Group CU, was sentenced to two years in prison and ordered to pay more than $786,000 in restitution for embezzling $1.4 million from the Omaha-based credit union. Domanski also was ordered to serve four years supervised release after the prison sentence. She was a former vice president of accounting during the embezzlements, which began in 1993 and continued over 15 years, said court documents (Associated Press Newswires March 25). Domanski created fake entries into various ledger accounts and made cash withdrawals from accounts and from the credit union's vault. The sentence resulted from a plea bargain …